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Why CyberArk Software Stock Jumped 11% in May

The cybersecurity leader's surging share price may be a sign of even greater gains ahead.

What: Shares of CyberArk Software(NASDAQ:CYBR) rose 11.2% last month, according to data provided by S&P Global Market Intelligence. The cyberattack-prevention specialist is enjoying strong demand for its "privileged account" security solutions, which help to protect against the most-advanced cyberthreats -- those that use insider privileges to penetrate network perimeters and attack the most-vital aspects of an enterprise's IT infrastructure.

So what: CyberArk surpassed Wall Street's expectations when it reported first-quarter results on May 5th. Revenue jumped 43% year over year, to $46.9 million, and adjusted earnings per share leapt 44%, to $0.23. That topped analysts' estimates for revenue of $43.4 million and adjusted EPS of $0.16.

Even better, management boosted its full-year forecast, with 2016 revenue and adjusted EPS now projected to be in the ranges of $209 million to $211 million, and $0.87 to $0.91 respectively, compared to CyberArk's prior guidance of $205 million to $207 million, and $0.83 to $0.86. Wall Street cheered these strong results, and several companies raised their ratings and price targets for CyberArk's stock.

Now what: During the company's earnings conference call, CEO Udi Mokady said that CyberArk is "just scratching the surface" of its tremendous potential. Cyber attacks are growing in size and sophistication -- a worrisome trend that's unfortunately likely to continue for the foreseeable future.

However, it's this trend that's helping to make CyberArk's best-in-class privileged account-security solutions increasingly vital to organizations of all sizes. In turn, the cybersecurity specialist is rapidly expanding its client base, both within its core enterprise segment, and in fast-growing adjacent areas such as government organizations, universities, and mid-sized businesses.

Additionally, CyberArk is strengthening its alliances with the providers of ancillary cybersecurity solutions, such as threat-prevention leader FireEye, and antivirus software-maker Symantec, which should help to further insulate CyberArk from the competition. Moreover, its profitable operations, cash-filled balance sheet, and only $1.5 billion market cap could lead larger cybersecurity companies to attempt to acquire CyberArk -- likely at a substantial premium to today's prices -- rather than compete with it directly. As such, CyberArk's leading position within its fast-growing privileged-account niche appears well secured.

While shares rose 11% in May, CyberArk's stock is still down 30% during the past year. That gives investors a chance to pick up some shares of the cybersecurity leader at a considerable discount to where they were trading this time last year. More importantly, if CyberArk can continue to compete and win within this important, emerging industry -- and I believe it can -- today's prices may turn out to be quite a bargain in the years ahead.

Joe Tenebruso has no position in any stocks mentioned. The Motley Fool owns shares of and recommends FireEye. The Motley Fool recommends CyberArk Software. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Joe honed his investing skills as an analyst for Stock Advisor, Fool One, Supernova, Million Dollar Portfolio, and Income Investor. He battle-tested his investment philosophy and strategies as portfolio manager of Tier 1, a market-crushing Motley Fool real-money portfolio that delivered 24.58% annualized returns during its existence. Now, Joe’s mission is to pass on what he’s learned -- and what he continues to learn -- as a contributing writer to Fool.com.
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